Wed 05 Feb 2014

Constructive dismissal

Employers and employees are generally familiar with the concept of unfair dismissal and so employers tend to approach dismissal with one eye on the risk of an unfair dismissal claim. However, there is less awareness about the circumstances in which termination of employment by an employee through resignation can lead to a successful constructive dismissal claim. This article aims to provide an overview of the requirements of a successful constructive dismissal claim.

What is constructive dismissal?

Constructive dismissal is the term used where an employee resigns in response to a breach of a fundamental term of their employment contract by their employer. In this situation, an employee is entitled to treat him or herself as having been dismissed as a result of the employer's conduct.

For a constructive dismissal claim to succeed, the employee needs to show that:

  • the employer was in fundamental ("repudiatory") breach of their contract of employment;
  • the employee resigned as a result of that breach; and
  • the employee had not "affirmed" the contract following the breach by, for example, unreasonably delaying in resigning.

Step 1 - What is a repudiatory breach of contract?

A repudiatory breach of contract is a significant breach which goes to the heart of the contract.

Employees have both express and implied contractual terms of employment. The express terms are normally set out in writing in their contract of employment. Implied terms may be terms which are implied through custom and practice, or terms which are implied by law. An example of a repudiatory breach of an express term would be a unilateral failure to pay salary that an employee was contractually entitled to. Usually it is fairly straightforward to identify a repudiatory breach of an express term. However, often the repudiatory breach is not as blatant as this and will instead be based upon an accumulation of events which, taken as a whole, amount to a breach of an implied term, most commonly the implied duty of trust and confidence.

A breach of the implied duty of trust and confidence can arise where there has been a series of incidents which, taken together, amount to conduct by the employer which is calculated to or likely to destroy or seriously damage the relationship of trust and confidence between employer and employee. This could arise as a result of, for example, a campaign of bullying and harassment of an employee which the employer has failed to deal with, or where the employer has taken action which renders it impossible for the employee to properly carry out their duties.

Employees claiming constructive dismissal will often refer to the "last straw" which is a final incident in a chain of conduct by an employer which leads them to resign, usually in a situation where they are claiming that there has been a breach of the implied duty of trust and confidence. The "last straw" may not be significant enough on its own to amount to a repudiatory breach but it must add something to the breach and not be utterly trivial or innocuous. It is possible for a last straw event to "revive" historical breaches which would otherwise have been affirmed by the employee.

Determining whether a repudiatory breach has taken place is very fact specific and will often depend upon the credibility of the relevant witnesses before the Employment Tribunal.

Step 2 - Employee must resign following the breach

There must be a link between the relevant breach by the employer and the employee's resignation. However, the breach does not have to be the only reason for resignation as long as it is one of the employee's motivations for resigning. Therefore the fact that an employee has found alternative employment, resigns and immediately starts a new role will not preclude them from claiming constructive dismissal if they were partly motivated by a fundamental breach of contract by their employer. They must, however, not delay too long following a breach whilst they search for another job or they may be found to have "affirmed" the contract, which is the third step in establishing a constructive dismissal claim.

Step 3 - Employee must not affirm the contract

Following the employer's breach, the employee can either "affirm" the contract and insist on its continued performance, or "accept" the employer's breach and bring the contract to an end. If the employee affirms the contract then they are indicating that they wish the employment contract to continue, notwithstanding the breach.

While delaying in resigning may not necessarily amount to "affirming" the contract, an unreasonable or prolonged delay may indicate the employee affirms the contract and loses his or her right to raise a claim for constructive dismissal. Generally speaking an employee who stays in employment for a limited time following a breach and makes clear their objections to what has been done will not be interpreted as affirming the contract and a claim for constructive dismissal can still be raised. However, an employee who remains in employment for any significant length of time following a breach runs the risk of affirming the contract and losing the right to claim constructive dismissal. Legal advice should therefore always be taken as soon as circumstances arise that an employee considers may amount to a fundamental breach of contract.

Who can claim?

Normally, only former employees who have at least two years' continuous service with their former employer (or if they started on or before 6 April 2012 then one year's continuous service) can bring a constructive dismissal claim. However, there are circumstances where no qualifying service is required including in circumstances where the constructive dismissal is a result of the employee exercising certain statutory rights or where it relates to unlawful discrimination.

Lodging a Claim

A claim for constructive dismissal must be lodged with the Employment Tribunal within three months less a day from the date of termination of employment and this time limit is strictly applied.

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